As many of you know, we have been expecting Google to respond to the April 2012 launch of AmazonSupply.com by launching their own B2B products shopping site. Recently, and it would seem quietly, they released the new Google Shopping for Suppliers site in beta. To begin with it is only only open for sellers of electrical & electronic products but I would expect that their product offering would expand as their beta site proves itself and Google learns more about B2B sellers and transactions.

Apparently, Google is verifying suppliers before they add their “good housekeeping seal of approval” for listed merchants.
They are also charging a $1000 “yearly verification fee”, required for American suppliers with similar fees for foreign suppliers. (Note the number of Chinese sellers.)
There are also different the data feed requirements and terms and conditions adjusted for the nuances of B2B product sales. I am glad that Google is recognizing those and not trying to force fit B2B transactions into B2C formats. Check out how they handle price, shipping, tax, returns, refunds, etc.

We expect to see more entrants into the B2B marketplace and CSE space. With Amazon and Google now in the game, we can’t help but wonder when eBay or maybe even Facebook will enter?

If you are seeing more online competition from B2B marketplaces, CSEs and other online sellers and want to discuss your strategy to respond please give us a call. We have a number of client assignments in this area so we are in a position to efficiently advise the B2B multi-channel/catalog merchant. While many B2B catalogers may think such new competition is negative we believe that overall if taken advantage of correctly it will be a net positive to your business model. Regardless, online marketing changes are dramatic and they must be addressed.

B2B Sellers: Are you getting your share from Online Marketplaces and CSEs?

I have asked a number of B2B distributors in the last few months if they are confident they are getting their fair share online. Without exception they all told me that their online sales were growing nicely often at more than twice the rate of their offline sales. Then I asked what, specifically, they were getting from the online marketplaces and CSEs-comparison shopping engines. More than half said they were not selling via these online channels. They went on to say that these channels were not B2B focused and “not much of their product moved through these channels. I consider that to be an outdated and competitively dangerous view. Marketplaces like Amazon.com (and now AmazonSupply.Com), Ebay and others move billions of dollars of B2B products. Competitive shopping engines like Google Products, Buy.com, Shopzilla.com and others drive more billons. More importantly such online channels are huge sources of new customer acquisition.

Now, to save some time, I will share with you what I commonly here as “objections” to these channels along with my differing perspective.

1. “They aren’t focused on the B2B buyer”. True, up to now they have not been focused on the B2B but things are changing quickly with the launch of AmazonSupply.com and the realization that B2B products like tools, MRO supplies, laboratory supplies, electronic components and a host of other products (see the 16 product categories offered on AmazonSupply.com) can and are being sold via marketplaces and CSEs. Both see B2B sellers as a new, growing marketing opportunities are adding B2B functionality and services fast.

2. “They don’t sell our kind of products” Wrong! Take your top 100 SKUs and go searching for them on Amazon and the top 10 CSEs. You will be surprise how many of your products you will find and who’s selling them. You will find many new competitors who sell only in these two channels. Your absence has given rise to nibble new competitors who know how to do it and recognized the void in your product area.

3. “The customers we acquire from these sources are not as good as our normal customer.” True, often (not always) they are not. You will need to qualify newly acquired customers from marketplaces and CSEs using RFM, products purchased, SIC, size and other such criteria to profile and prioritize new acquisitions. You know how to do that. Remember however that the reach and presence of these new channels are far beyond anything you generate by mailing a catalog or making sales calls. Broad reach usually increases quantity of response and lowers quality. You may get 1000 new customers a month from these sources but only 100 measure up. That is still 100 new customers you would not have otherwise.

4. “Selling through these channels is complex and difficult”. Online only marketers would say that producing and mailing a catalog or building a telephone sales team is difficult so it’s not surprising what is new to traditional B2B distributors seems difficult at first…. and it is…but the size of the opportunity and the rate of growth dictate that we must become as expert in these new channels as our traditional channels. Fortunately, there are specialized agencies around like Mercent.com and ChannelAdvisor.com to help us optimize our valuable content, manage feeds/orders/feedback and dynamically change our pricing in an ever-changing online marketplace.

5. “Selling on Amazon and other marketplaces costs too much.” Yes, it’s not inexpensive but it’s not just about the cost, it’s about the value and opportunity delivered. What is the cost of not doing it? How does the cost to acquire compare to your mailing and telephone methods of acquiring new customers? What is the quality and lifetime value of the customers acquired in these channels versus traditional channels? How fast are these channels growing versus traditional channels? What is the advertising value in these channels versus traditional channels? What is the value of the business intelligence acquired in these channels? You can see it’s not a simple analysis based on direct cost only.

6. “I want buyers to come directly to my site”. Yes, given the choice, most marketers would want buyers to come directly to their site to maintain control, selling price, margin, etc. But the reality is that buyers are not going to do that. B2B buyers have advantages when they use marketplaces and CSEs. They get better marketplace information, competitive bidding and better prices! Your own business probably shops on marketplaces and CSEs so why shouldn’t your customers? Trying control and drive customers to do what you want them to do will only drive them away.

7. “New customers that come from these online sources do not place a second order” Well, it may be true that their propensity to place a second order may be lower than customers acquired via mailings or on the phone, however, you as the B2B seller does have influence over that. You need to craft new customer welcome programs and second order incentives specifically for these new customers. Treat them differently and chances are you can change their propensity to place a second order.

8. “These channels are all about price, price, price. I don’t want to discount”. Yes, in a more perfect online market more focus is often on price, but we can’t control that. We don’t set the rules of the game; we only control how we play. What we can do is strategically use the dynamic pricing functionality available in these channels (and not available anywhere else in our business) and our ability to optimize our merchandising and content by the specific channel to offset some of the focus on price.

9. “If I sell on Amazon, Amazon sees what I sell and then knocks me off”. Somewhat true, but ask yourself could a competitor know what you sell by looking at the space and positioning of your key items in your catalog? Might you change your sales mix and margin in these channels by manipulating content and your price? Should you miss out on the opportunity because of difficulty in managing one aspect of the channel?

10. “Marketing dollars invested here are risky”. In fact, the opposite is true. Printing and mailing a catalog is risky. You incur all that investment with a fixed and vulnerable offer (usually for the life of the catalog) before one order is received; selling in these online channels generally only incurs costs when you have an order.

11. “I don’t think I am losing sales or customers to these channels” You may not be (but I doubt it) but the fact remains that many of your products are being sold in these channels and if you are not in them you are not getting a piece of the action.

Given the growing importance of these channels, the launch of Amazon Supply and the proliferation and growing specialization of CSEs in my opinion not selling on these channels is not an option. I have now seen too many examples of new market entrants selling exclusively on these channels and building sizable businesses in less than five years. My view is that business should have been yours, the traditional B2B seller except for the fact that you were slow to adopt these new technologies and selling methods. I have also seen many examples of smart B2B distributors mastering these channels and now enjoying 10-25% of their revenues and new customer acquisition coming from these channels with low fixed costs and little risk.

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